Annual Testimony of Treasury Secretary on International Financial System

Today's meeting will be.

Committee on Financial Services will come to order. Without objection, the chair is authorized to declare a recess of the committee at any time. Today's hearing is entitled " The Annual Testimony of the Secretary of the Treasury on the State of the International Financial System". Without objection, all members will have five legislative days within which to submit extraneous material to the chair for the inclusion in the record. I'd like to remind all of our guests today in the hearing room uh that uh in accordance to rule eleven, clause four of the house of representatives, to observe the standards of dignity, propriety, courtesy and decorum traditionally observed by the house and this committee. I now recognize myself for four minutes for an opening statement. Morning, Mister Secretary, I want to welcome you back to the committee. We thank you for being here today and for your continued efforts to ensure America's leadership in the global economy advances the interests of American workers, businesses and taxpayers. The United States plays a central role in shaping the international financial system. That influence reflects the global importance of the United States dollar, the size and depth of the US financial markets, and our long-standing role in critical institutions. such as the International Monetary Fund and the World Bank. The United States is the leading shareholder in both of these key institutions. That gives the committee an important responsibility to ensure that American interests are protected and that US governance is subject to the appropriate oversight. We must ensure these institutions remain focused on their core missions, operate transparently, and use their resources wisely consistent with that core mission. Under the previous administration, the World Bank and the IMF were pulled away from those core responsibilities by mission creep. For example, trying to transform the IMF into a climate development bank. That's not its role and it distracts from its incredibly important mission. Fortunately, under the Trump administration, we've seen a renewed emphasis on delivering measurable results through accountability and discipline at both the IMF and the bank. The World Bank must remain committed to reducing poverty and promoting economic growth by directing resources towards countries that genuinely need development assistance. For years, this committee has raised concerns about the World Bank continuing to provide billions of dollars of financing to China, the world's second largest economy and one of America's foremost strategic competitors. China has enormous financial resources of their own. It is a major global creditor. and uses state-directed investment to advance its economic and geopolitical interests around the world. American taxpayers should not be back-stopping Beijing and their ambitions at the World Bank. That's why the World Bank's decision to phase out its lending to China by twenty thirty-one is an important step in the right direction. We've also seen an important and long overdue change in the World Bank's approach to energy. In twenty twenty five, with strong bipartisan push from this committee, by way of H R fourteen seventy four, the International Nuclear Energy Financing Act, the World Bank took its first concrete step in decades towards re-engaging with nuclear energy, by agreeing with the International Atomic Energy Agency to receive nuclear expertise, support existing reactors, and advance the potential of small, uh modular, nuclear reactors. This year we also saw the first contribution to a new nuclear energy assistance trust fund at the bank, which I hope we'll see additional funds from the US Treasury going forward. Developing economies need access to reliable and affordable electricity to grow, making this exactly the kind of practical, pro-growth approach these institutions should fully embrace. I commend the progress of the World Bank and I hope that this commitment will translate into more projects and more financing around the globe. While we've seen positive reports and progress at the World Bank, concerns remain about the International Monetary Fund's approach to China. The IMF plays a critical role in promoting international monetary cooperation and safeguarding global financial stability. Fulfilling that mission requires rigorous economic oversight and transparency. China presents a major test of whether the fund is willing and able to fulfill that responsibility. In its most recent article four review, found that weak domestic demand, real exchange rate depreciation, and reliance on exports have contributed to external imbalances and as-ber-spill-overs for China's trading partners. We look forward to our discussion with you, Mister Secretary, and I yield back. I recognize myself uh just for a point of personal privilege with the ranking members' uh uh support uh before we get started today I would like to share my congratulations to three of our committee staffers as they prepare to depart the Hill and start new endeavors. Jay Jang has worked with me for five years, running the financial services portfolio and fighting hard in Arkansas' s second congressional district. His tireless work led to the development of our bipartisan Main Street Capital Access Act which received a strong bipartisan vote uh in July, two hundred and seventy votes. I'm also unbelievably proud of what we've accomplished together and can't wait to see Jay's next step. Nick Rockwell joined us this Congress and led our Digital Assets and Financial Technology and Artificial Intelligence subcommittee. We welcome here to this committee after having worked uh for eight years for our friends over at the House Agriculture Committee. We've been lucky to have him, he's been invaluable. Getting genius to the President's desk and passing clarity in the House with a strong bipartisan vote was uh uh demonstra demonstrative of his hard work. And finally, uh, I want to recognize uh my good friend for a long time, Dan Snyder. Dan has been our Communications Director on the committee, and also worked for me in uh our Arkansas office. He's been a steadfast communicator and made sure that my constituents know how hard uh we're all fighting here in Washington to ensure they have a better economy ahead. I wanna thank all three of these uh fine staffers, wish them well in their future, and invite the committee to join me in a round I now recognize the ranking member of the committee, Miss Waters, for four minutes for an opening statement.

Uh, thank you very much, Mr. Chairman, Secretary Bissett. You have broken many promises since you last appeared before this committee. You pledged deeper cooperation with our trading partners, stronger American leadership, and greater stability in the global financial system. The reality however, as Democrats warned, is an increasingly isolated America, a weak self-serving presidency, and instability everywhere, including here at home. Your deflection and gaslighting should be interesting. What tells will you tell about economic supercycles when families take out loans to buy food? What stories will you spend to Americans whose home ownership dreams slip away with seven percent mortgage rates and tariffs on building materials, adding nearly eleven thousand dollars to the cost of a new home. What do you have to say about businesses struggling to survive under your nonsensical trade policies? What answers do you have for six dollar diesel and impacts of Trump's war in Iran, that are driving up the cost of living for everything, President Trump? And committee Republicans assured the American people that you were quote, steady hand, who would improve the economy well after twenty months of Trump's economy. I say your hands are shaking. Americans know the truth because they feel it at the grocery store, the gas pump, in their wallets, and around their kitchen tables. The only boom that's happening is the one where the Trump, Trump and his family have made more than two billion dollars since taking office. Ironically, while families endure, Mister Secretary, you have managed to find billions to bail out Argentina and your Wall Street buddies. You committed United States assets to support Japan's currency while you failed to lower long-term interest rates. You have attacked the economies of our closest allies, driving up costs here at home. You have been cozying up to Putin. given waivers to Russia to earn billions from sanctioned oil and extending its war against Ukraine. Just imagine if this administration cared even half as much about struggling Americans. Who else benefits while you ignore your responsibilities? Wall Street, for one. The stock market may be hitting record highs, but one out of five Americans are rationing their meals. AI companies, too, are doing very well on your what? while you dismiss the threat to workers and jobs and our financial system, and even our very existence. And we can't forget crypto. You call stable coins a revolution, predicting increased demand for US treasuries, yet you're ignoring the massive conflicts of interest in the Trump family, stable coin and crypto businesses. The Trump family is cashing in, cashing in from the Oval Office while Main Street suffers. Committee Democrats have given you every opportunity to do the right thing. We've sent letters, demanded answers, but consistently you've disregarded or ignored our oversight. This hearing is traditionally an opportunity for the Treasury Secretary to deliver facts to this committee, and the American people. But I cannot caution, but I do caution everyone listening today. What, whatever you hear today, check it out. Question it. Don't be gaslit by the Trump administration. and spam deception. And a word about Cuba. You cut off all the oil to Cuba. You're starving the families, you're starving the children, they don't have electricity, uh they can't get food in. What are you doing, mister secretary? Why are you being so cruel? I know we have a cruel president, but do you have to be a puppet? Do you have to do whatever he wants you to do? What are you doing to this country? You're making us not only look bad, but ACBAD all over the world. And I wanna tell you history is not gonna be kind to you or this administration. And I say to you, stop trying to kill off the families in Cuba. Stop starving the children. Let the oil flow. Let them have electricity. Allow them to get trade and food, et cetera, et cetera. I could go on all day, but this is not a fun day for me. This is a very critical time. And you are in a position where you could do a lot better. You could be kinder. You don't have to be cruel. You don't have to see children starving and dying. And with that, mister hell, I give I just give back the balance of my time.

The gentleman yields back. The chair recognizes the gentleman from Ohio, Mister Davidson, who chairs our National Security Subcommittee, for one minute for an opening statement.

Thank you, Chairman. Secretary Besson, I wanna commend you for delivering real results for the American people. You've taken steps to put our to restore focus to our international financial institutions and ensure that America remains the center of global markets, and the US dollar remains the world's reserve currency. You've educated the public, Senator Warren, uh, especially on the utility of currency swaps, clearly from, uh, the ranking members' oka- opening remarks, more work remains. Uh, you've used Treasury's authorities to pursue sanctions evaders, hostile regimes, and institutions funding America's adversaries. You've put taxpayer protection first by cracking down on fraud, waste, abuse, money laundering, cyber-enabled scams in illicit financial networks. Treasury's identification of seventeen and a half billion dollars in suspect health care fraud is a powerful example. You've constitutionally protected privacy by rolling back the beneficial ownership information reporting requirements under the onerous Corporate Transparency Act. Thank you for your leadership, a steady hand, repairing damage done. by years of prior neglect or malfeasance. Thanks for your work to make America great again. I yield back.

Gentlemen, his time has expired today, we welcome the testimony of the Honorable Scott Bessant, Secretary of the Treasury. Secretary Bessant, we thank you for taking time to be with us today. You'll be recognized for five minutes to give an oral presentation of your written testimony. Without objection, your written statement will be made part of our record. Mr. Secretary, you're now recognized for five minutes.

Chairman Hill, Ranking Member Waters, and members of the committee. Thank you for convening today's hearing. I look forward to discussing the international financial system as we strengthen American leadership within it. In recent weeks, the United States brought that leadership to Asheville, North Carolina.

Stop the sanctions that are killing Iranian civilians and the entire country. Committee will be in order. You're murdering our family and our Committee will be in order. I formally request that those who are causing the disruption cease their actions immediately. Stop the sanctions! The committee will suspend until Capitol Police can restore order. Expect more. Uh, please, audience, be in compliance with the House rules, Mister Secretary, you're recognized.

Uh, well, that's a November decision, this versus that.

Stop messing, you're a war criminal. How dare you? You're a war criminal. How dare you starvation? Committee will suspend till Capitol Police can restore order. Stop the sanctions on Iran. Stop the sanctions on Iran. You're a war criminal. Shame on all of you for sitting here. A lot of people died or or us or the people of war. Where's your funding come from? That hearing is gonna be at two o'clock. Do you want to hear it? Mr. Secretary, please proceed. Good.

In recent weeks, the United States brought that leadership to Asheville, North Carolina, where we welcomed the world for our G twenty finance ministerial. For decades, all of our people

Money versus land. But you're really, you're really willing to, you're amazing,

For decades, multilateral forums like the G-twenty accumulated

No more than that.

sprawling agendas while losing sight of their core

Green on ground, no more than that, I'm sorry, no more than that, Mr. Secretary, we want to hear what you have to say. no more than that, no more than that, no more than that. Bring them back, I choose not, we'll neither write. They're not our cause. Green on ground. Mr. Secretary, you're recognized.

For decades, multilateral forums like the G-twenty accumulated sprawling agendas while losing sight of their core missions. Under President Trump, we are getting back to basics.

That makes sense.

Gr- growth is the condition on which durable

No more war. That makes sense. No more war. The secretary, please suspend. That makes sense. No more war. That makes sense. No more war. The military doesn't call it. This is not okay. Yeah. That makes sense. No more war. This is not okay. I don't understand the crime. I fear we have to fight in front of Mr. Secretary, you're recognized.

Growth is a condition on which durable prosperity depends, and our chair's statement achieved broad agreement on the need to promote it. I'm also pleased that we reached consensus from economies representing more than two thirds of global GDP to address excessive and persistent imbalances, advance financial literacy, improve the global sovereign debt architecture, and support regulatory modernization. In substance and in spirit, these priorities reflect the administration's approach to international institutions, by ensuring that American time and resources serve American interest. We are also bringing that same discipline to the IMF and World Bank, so they remain true to their core mandates and are better positioned to promote economic growth. Of course, as growth guides our leadership on the world stage, it is the force that is carrying our great nation into a new era of strength here at home. President Trump's economic turnaround is especially impressive, given the severity of the situation he inherited from his predecessor, when inflation soared to a forty year high and middle class families were torched with price increases of twenty one point five percent, or more. Under President Trump, the private sector has created over one million jobs, real wages are outpacing inflation, the bottom twenty five percent of wage earners are seeing larger wage increases than those at the top. And the working family's tax cuts has delivered the largest share of tax relief directly to millions of low and middle income Americans. Over sixty-four million tax returns claimed at least one of President Trump's signature new tax cuts. No tax on tips, no tax on overtime, no tax on American car loan interest, and an enhanced deduction for low and middle income seniors. Through tax day, working families received over three hundred and twenty-five billion in refunds. More than forty million families have claimed the permanently doubled and expanding child tax credit. And as important as what this legislation is achi achieved is what it prevented. If opponents of the working families' tax cuts had had their way, our economy would have absorbed the largest tax hike in history, over five trillion dollars. Each of these improvements points to a structural renewal of America's capacity to build to produce and to prosper. US manufacturing is roaring back to its fastest pace in years. August marked eight consecutive months of domestic manufacturing growth. Business activity has surged to a fifty-two month high. And as companies allocate trillions to building and expanding across the US, the Atlanta Fed now projects third quarter GDP growth to surpass four percent. A new industrial super cycle is moving from investment into production and from from blueprint into paychecks. Finally, the strength of the of our economy has allowed the United States to wage the greatest economic isolation campaign in the history of the world, against the Islamic Republic of Iran and its enablers. President Trump has taken action that his predecessors have long deferred against a regime that devotes itself to death to America and seeks nuclear weapons to do just that. Under his leadership, America is no longer managing the Iranian threat. We are ending it, and America's economic resurgence is reinforcing our capacity to do so from a position of strength. Together, the growth we are advancing abroad, the prosperity we are building at home, and the might we are unleashing against our adversaries are bound by the same conviction to restore American strength in service of the American people. That is the purpose of our economic leadership and the principle that will continue to guide it. Thank you, and I look forward to your questions today.

Thank you, Mr. Chairman. We'll turn to member questions. I'll recognize myself for five minutes. The secretary, when the then FinCEN Director Gatke was before the committee in July, she testified that she was in discussions with Treasury leadership regarding updating the suspicious activity report and currency transaction reporting thresholds which as you know from uh your years in the private sector are decades out of date. We heard the same under the testimony from the Biden administration. A treasury report to Congress on updating the thresholds is now five years uh overdue. So, uh, Mr. Secretary, what's your view on trying to tackle this issue of uh raising the threshold limits on suspicious activity reports and CTRs?

Uh, Chairman Hill, very important question and thank you for asking. Uh, we believe that the Uh, we must get this right, because as you said, it has gone on for years, and we want to do that with a combination of potentially raising the thresholds, and also giving credit to institutions for the duration that they have known their clients. So we are in the midst of this, and as always, we will be looking after our smaller financial institutions, small banks, and community banks. to obviate any excess expense that they are doing it while maintaining the safety and soundness of our financial system.

I think that's important, and I also think just uh to answer the question from big or small, that the information being provided is being used and helpful in our fight against the cartels and global terrorist uh illicit finance because a lot of financial institutions don't get the attitude that that's the case. And I'm sensitive to law enforcement that's demanding They wish the CTR limit were a dollar, so that they could look at every single uh possible category, but your leadership I think will be important. We'd like to make progress on this. It's a priority for the committee. We also appreciate your work as noted in your statement about uh cutting Iran's murderous regime off from uh work-arounds uh of the existing sanctions. Your Operation Economic Outcast is finally seeking to bring that game of hide-and-seek to close. However, I'm concerned that China clearly and the UAE have done too little to sever themselves from trade and money movements from Iran. What discussions are you pursuing with those two governments, particularly to get them in line with uh your goals?

Uh, I think that we have seen some very uh forward-facing statements from the UAE. Uh, they have announced that they have cut off financial transactions and trade, they uh with iran and the one of my deputies was just there and had a very good discussion with the all the members of their financial system and as you would see uh two weeks ago we sanctioned the branches of an egyptian bank in dubai and that bank will be closing uh that bank transferred more than one point eight billion dollars since twenty twenty five uh to iran

hmm

So our message has been, and it has been heard, that we know who you are, you know who you are, stop. So we now have a cadence, we have sanctioned three banks, uh with Chin with China, we have had some very good private discussions, and I look forward to those continuing uh this weekend, uh when I meet my Chinese counterpart, the the Vice Minister, and I'm sure it will continue during uh, President Shisharit's state visit.

Appreciate that. I think that'll be an important agenda item for the bilateral discussion. Mr. Secretary, you also know that the uh, Supreme Court is recently uh, reviewing petitions that they review the Corporate Transparency Act. I personally support the Supreme Court reviewing this act, because I think the private sector needs a definitive answer on the Corporate Transparency Act. I wanna thank the Treasury and the administration for targeting it in line with uh the work of Mister Davidson. But I hope that uh if the Department of Justice uh contacts the Treasury, that you wouldn't object to that uh review at the court. Let me turn to the IMF in the time I have remaining. My opening statement was about going back to basics for the IMF uh and uh I don't wanna see China uh added uh increased its allocation in the uh special drawing rights basket of currencies. I think that's a mistake. It's not a market economy. It doesn't have a freely traded currency. Um, you called out China with the all nineteen countries called out China at your G-twenty meeting. Would you agree that uh IMF needs to hold China more accountable?

Uh, I I believe that the IMF uh is in the advanced discussions with China on the nature of their imbalances. and the potential threats to global uh financial stability that those imbalances may pose.

Thank you. I yield back. I recognize the ranking member of the full committee, Mrs. Waters of California, for your question.

Uh, thank you very much. Um Secretary Bisset, Americans and small businesses feel the pain of your reckless economic policies. They're paying sky-high prices for beef, gas, electronics, and really, really everything on and around the kitchen table. With the administration's chaotic tariffs, reckless war in Iran, and other unsound policies, the average American is paying three thousand five hundred dollars more than they otherwise would be for groceries, gas, energy, and health care. And that was a number before President Trump started an unnecessary trade war with our neighbors and allies in Canada. Now Thanks to retaliation on wood and lumber, even the kitchen table itself is unaffordable. Yet, Trump is not concerned about all of this. The president has said repeatedly that there is no affordability crisis. That is a hoax. He has said that he literally does not care that Americans are paying more for gas and diesel caused by his war of choice with Iran. For your part, you launched a so-called economic D-Day against Iran, but markets barely blinked. crude oil prices continue to increase, and you have dismissed the effects on American households and businesses. While middle and lower income Americans feel the painful effects of the K-shaped economy, you claim that neither it nor the i- economic difficulties exist. So, Secretary Besson, you have dared the markets to bet against you, claiming that, quote, "I am the house now," quote, unquote. So despite your feeble efforts, There continues to be a sell-off of US treasuries with thirty year treasury yields rising to levels that have not been seen since two thousand and seven. Just yesterday, in fact, the ten year treasury hit five percent. Mister Secretary, do you agree that these high treasury yields or interest rates on Americans' bonds means that loans paid by families to fix a roof or buy a car will also be exp expensive yes or no

uh the the us bond market has been the best performing major bond market in the world

yes or no mister secretary yes or no mister secretary

and we have had record record

reclaiming my time

record

reclaiming my time

we have had record

reclaiming my time

the uh the uh better than the past twenty years

reclaiming my time reclaiming my time you keep talking i'll keep reclaiming my time and i'm asking you mister secretary turn it to your trade policy If tariffs are not inflationary, as you claimed in your previous testimony, then why has inflation increased by more than three percent over the past year? Do you deny that inflation is too high at three percent, yes or no?

The Representative Waters,

Yes or no,

they uh they you're you're not making sense because they if people leave the

Mister Secretary, yes or no, Mister Secretary, reclaiming my time,

tariffs are inflationary the tariff levels are down so they are if what you're saying

reclaiming my time, reclaiming my time,

is completely nonsense and I'm saying

reclaiming my time,

Yes, the general rate

reclaiming my time.

It's the general lady's time.

I I didn't hear you, Mr. Hill. What'd you say?

I said it's the general lady's time.

Does the time belong to the general lady?

Indeed.

Indeed it does. And so that's not good enough, sir. You and President Trump, the so-called conservatives, you have overseen an increase in the debt to a record forty trillion dollars. Forty trillion. You have promised reduced deficit, but delivered only higher numbers and paying for American households. And this is so outrageous when you and others have claimed uh to be about uh getting rid of the deficit. Well,

True.

but maybe none of that matters if President Trump continues to blindly push for AI and data centers with absolutely no safeguards. He's doing this even as constant threat scour rocket for America. Uh, did you hear what Bill Gates had to say? Did you hear what Elon Musk had to say? Did you hear about anthropic? Did you hear about I'm all day? They all said stop it, watch it. AI is dangerous. You gotta be careful. Did you hear any of that?

Uh, they could stop, they could stop any time they want to.

Yes or no? Did you hear any of that, yes or no?

They could stop, they could stop their progress any time they want to.

Reclaiming my time. Reclaiming my time. Did you hear what your friends had to say? What the big billionaires had to say? Did you understand that they said we're moving into a dangerous period of time. We need to watch it. We need to slow down. Did you hear that?

Uh, this administration has been at the forefront uh of examining the models. We began model examination, yeah, more than five or six months ago.

Your friends said watch it, be careful, that we're moving into a dangerous time on AI. And if you don't admit that, it means that you are not willing to stand up to the truth, because you heard it, you know they're saying it. These are the guys that you all work with. These are the guys that you have to be more billionaires and trillionaires.

I think if these people want regular ones,

So you know what they're saying.

then I'm expired.

You don't have any more time.

The chair, the chair now recognizes the Vice Chairman of the full committee, Mister Heisling of Michigan, for five minutes.

Thank you, Mister Chairman, and Secretary Besson, this has become a common theme. Would you like to respond on my time that keeps eating into my time because you can't actually answer the question and I'll give you thirty seconds if you'd like to respond to any of that.

To to uh which piece? There's so many.

Well I I it's a smorgasbord, I understand. Well we can move on. Um interestingly enough, the idiocy that we saw earlier, um I'm gonna be doing a hearing in the Foreign Affairs Committee uh today, titled " Trojan horses, covert foreign malign influence operations", which will be uh discussing organizations like Code Pink and the Sing uh Singham network which has funneled hundreds of millions of dollars into the US to fund idiots like this so that they can come and do things like this performance art that they are trying to do. Um, so, uh, that is, uh, my apologies, but I guess you can expect more and maybe we'll see if a few of these people can get arrested twice in a day when they show up at my two o'clock hearing. Um, so, Mister Secretary Besson, I understand Treasury Department and the broader administration have several tech security efforts running at the same time from work at NIST uh and the new quantum readiness task force uh to the launch of the AI and cyber security vulnerability clearing house called Gold Eagle how is treasury making sure these efforts work together while avoiding siloed or or duplicative efforts

if so we have the a effort across the government all all departments the treasury began with the financial services for which we are responsible, but whether it is the Department of War, uh, the Cybersecurity, the White House Office of Technology, we have been closely coordinating for more than six months on this.

Who who's lead on that?

Uh, it is an inter-agency process.

OK, is there a lead within the inter-agency? Or or not specifically?

Uh, I I wou- I would say the Sean C- Carencross, the uh, and Michael Kratzios.

OK. Alright. Um, these efforts may prove critical in protecting our financial plumbing. There's a lot of discussion about that, uh, specifically regarding the Gold Eagle Clearinghouse. Is there anything that you can share or plan to publish in the near future about how entities in the financial services sector from traditional financial institutions to the layer one block chain networks can qualify to participate? I think it is important these, uh, you know, the discussion that we're having here on the layer one block chain networks as well.

Yep. No, I I think that's very important and that they uh as as you would have seen in the news that as soon as the news of mythos came out i gathered the largest banks they uh who happen to be in d. c. at treasury to begin discussing this uh the largest banks they have very good cyber security resilience and they have been very helpful in terms of creating more resilience and that is moving down the capitalization chain from super regionals to regionals to small and community banks and then we are populating that out into the service providers.

I i is the real concern uh amongst the working group the plumbing side of this?

Well, it it it's the plumbing and it is the patching of a lot of open source code.

Yeah. OK. Um, I wanna work uh move on to something a little bit different. You know, uh, you and I have publ- previously discoursed uh in various uh publications. about our shared aspiration for the three percent target. I happen to chair some uh co-chair a bipartisan fiscal uh forum, the BFF. We chose that on purpose by the way. And we have introduced a r with my uh colleague Scott Peters from California, we've introduced a resolution that Congress should adopt this fiscal target of three percent of uh uh of a def budget deficit no more than a three percent of gross domestic product or lower. Um, I believe this is the most practical tangible goal we can set to turn to finally turn the tide on our national debt. In fact, we have up to uh twenty evenly bipartisan co-sponsors in the Senate companion bill. What's your current outlook on the three percent target? And uh can you even explain uh why this first step is not just critical to the international financial finance system but also to families and workers across our nation?

Well, the reason the three percent is important because the uh at three percent is when we start bending the debt curve and actually start paying down uh debt. The important thing to look at is the depi- what you're referring to, uh, Representative Huizenga, is the deficit to GDP, which actually the in the first fiscal year the Trump administration came down from the astounding level of about six point three percent.

Yep.

Uh, the calendar year was six point eight or six point nine, and the Biden, the uh breakaway spending, we brought it down to about five point seven, five point eight percent for the fiscal year. They uh so we actually did have a fiscal contraction, and we would have continued that fiscal contraction this year, uh but for the terraferring funds.

Uh if you wanna be interrupted again, show up at my subcommittee hearing at two o'clock today.

So when he goes back. Chair recognizes the ranking member of our subcommittee on capital markets, Mister Sherman of California, you're recognized for five minutes.

Um, Mister Chairman, I wanna thank you for focusing our attention on China, its special drawing rights, its access at least until twenty thirty one to the World Bank. Uh, but we were alerted to uh concerns about China just a few minutes ago, uh, when we had a Code Pink style, I assume it was Code Pink, disruption of this hearing. And I should point out that Code Pink is chiefly financed by uh uh uh Ch China, the communi and the Chinese Communist Party. Uh, one more reason to be concerned about China's role in international finance. Uh, the war has driven up gas prices. and has driven up interest rates. Before this war, the ten year was at four percent, now it's virtually at five percent. Um, last year I urged the administration to fill our strategic petroleum reserve. They did not. As a result, we have not been able to respond to the uh uh uh straight of formoo's problem, as effectively as we could. Now we have those of the administration talking about a bitcoin reserve. Uh n- I've never, no country that has ever won a war in history had a Bitcoin reserve. But if you don't have an oil reserve, and if you don't have reserves of rare earth minerals, uh then you are at strategic risk. Certainly any money that we would put in a Bitcoin reserve, which we could lose in a day, uh should instead uh be in strategic reserves of things we actually need to run the economy. We are told that tariffs don't uh drive inflation. Uh, boy, do we need financial literacy in this country. Uh, this hearing's focus is significantly on the role of the US dollar. Uh, the role of the US dollar is undermined by an incredibly erratic uh federal administration that makes us the laughing stop of the world. It is exacerbated by the crazy tariff policies. Now we have a war And the crypto bros made it clear that the whole purpose of crypto was to displace or partially displace the dollar, uh, as the world's, uh, reserve currency. What I'm particularly concerned about is that in the Senate they are considering the Clarity Act without plugging the loophole in, um, uh, that, uh, in stable coin. The deal with stable coin was that we'd allow stable coin, oh my god, but we at least we would prohibit interest on it. Now the crypto guys have spent uh, tens of millions on legal fees to evade that prohibition on crypto in uh on interest on stable coin. Um, a recent study has shown that that could lead to a one point five trillion dollar reduction in bank deposits, meaning that the primary way that we finance small business in this country would have one point five trillion dollars less, not to mention that there'd be one five point five trillion dollars less to deal uh with the Community Investment Act. Uh and finally of course, this uh stable coin is a system designed to be ultra-secret, to defeat uh law enforcement, and to ignore uh and evade our know our know your customer uh laws. Um. Now, Mister Secretary, one of the prince core principles of US banking system is accountability rests with identifiable people and institutions. Uh, yet uh, many DeFi protocols and de- uh centralized stable coin arrangements operate through uh uh decentralized governance, autonomous mechanisms that lack accountability. Uh, given the record of the number of DeFi DeFi exploits reported in the first half of this year, and the use of AI in exploiting code, Uh, are you concerned that a growing share of global financial activity could migrate to systems where there's no accountable party and no know your customer uh requirements? What implications would this have for uh our efforts against illicit finance, and what effect would it have on the integrity of the international financial system?

Well, that's why I'm pushing the passage of the Clarity Act, because it gives Treasury more authorities the to seek out this evasion.

The Clarity Act emboldens and uh makes more popular uh the rival to the US dollar, which is crypto, or at least uh they are the newest rival to the US dollar, and they've said that their purpose uh it's as if America owns Coke, and your suggestion is, let's invest in glorify Pepsi. Uh, we don't need the competition, especially when we're doing such a terrible job of running our economy, and of looking strong in the world.

No, it's not, Mr. Spard.

And I yield back.

Sure, recognize the gentleman from Wisconsin. Mister Fitzgerald, you're recognized for five minutes.

Miss Secretary, thanks for being here today. Um, I wanna go back to uh China f- if I could,

Okay.

a little bit more basic kind of approach. Uh, the IMF is supposed to promote, obviously, global financial stability. But it appears kind of on a regular basis, China continues to use opaque um lending practices, uh they manage kind of the exchange rate, and they're certainly delaying uh debt restructuring, I guess you would call it, in developing countries. Um what what are we doing or what can we do to use our influence, the United States use its influence at the IMF to hold China more accountable and make sure that uh Beijing uh doesn't uh continue blocking all these debt restructurings and distorting they're basically distorting kind of the international system right I was I was wondering give us your thoughts on that

yeah so congressman very very important problem we addressed it at the G twenty and the uh you we we will see the the first debt restructuring uh since then um and it it is because look the the Chinese System of lending includes many tolling agreements, many the uh hidden provisions, and transparency in debt restructuring is the uh uh is the ultimate uh feature for a successful debt restructuring. Uh, the IMF has joined us in believing that that must happen and that we must have transparency. Uh, it is also my opinion that this widely uh talked about Belt and Road Initiative has gone from a lending operation

And and so let me follow up. So at the G twenty, I know the discussion's happened, but um just the efforts by China and and really other countries in reducing kind of uh the reliance on the dollar. So um can you just kind of tell us why maintaining the dollar status as as the primary reserve currency matters? I know that seems like you know, this is the financial services committee that what what is your opinion on that and what's your take on that?

Well, con contrary to the gentleman from California, uh the the the US, the uh i is in in fact the leader, and the leader does not fear competition, competition makes us better. And we we have thus far uh dismissed competition, uh what we have seen is as a share of global transactions, the US dollar uh continues the uh to thrive the share of global transactions in dollars actually went up this year and the only thing that we have seen is a diminishment uh in the reserve assets and that is just through the decrease uh mostly the uh of russia and china uh in their reserve holdings uh but we have seen many other countries and as a matter of fact we just had the two of the most successful treasury auctions in twenty years which speaks to the credibility of our system and what this administration is doing and the global competence in us.

Mm-hmm.

What it it we oftentimes focus on um what the administration can do on that. What should Congress be doing to preserve uh not not just the dollar as a currency but just to stabilize the markets overall?

Uh, well, we we will be talking about a fiscal consolidation that is coming, and the uh as previous representative uh asked me. Uh, that is important. We have to get our house in order. And, you know, as I say, a strong dollar is not a price on a screen, it is a set of behaviors. And what we have seen in this administration, where we are creating regulatory certainty, tax certainty, trade certainty, and energy certainty, that is bringing in trillions of dollars into the US. So it is to help us fortify those policies.

Very good. Thank you for being here today. I I yield back.

So, I'm gonna yield back. Chair recognizes the ranking member of our subcommittee on digital assets, Mister Lynch of Massachusetts, chair recognized for five minutes.

Uh, thank you very much, Mister Chairman, and and I wanna thank the secretary for being here. Um, Mister Secretary, as as uh secretary of the treasury you have direct uh influence on uh the ability to advise the president on matters of AI. not only from an economic standpoint, but also from a regular stand regulatory standpoint, uh as well as a a national security standpoint. Uh, sometimes when I hear the president talk about AI, I and and I I have the honor of being the ranking Democrat on this this committee on on AI and crypto. Uh, when I listen to the president, I I do not believe he has a uh I don't think he has a grasp of of what we're dealing with with AI. I I I I'll be honest, I don't think the president could spell AI if I gave him the first letter. Uh, he is he is calling it a hoax. I think your your own leadership at treasury and the things you have tried to do and anticipated are far more logical and thoughtful than what I'm hearing from the White House. And I think, I'm not trying to put you on the spot here, but I I know you have suggested some things in the area of AI that are thoughtful and and cautionary and deliberate. And yet I hear the president saying this is all a hoax. You know, and and uh I I'm just I'm just trying to figure out do do you think the president understands that when we talk about building an AI, we're not manufacturing it like a car. Sometimes he he talks in those terms. We're really growing, we're growing AI in a lab. And and and and now, based on the statements from Anthropic and OpenAI and others, including Elon Musk, it's it's it's We're having a control problem. We're having an alignment problem. You know, this this incident with uh hugging face. We we've we've lost control. Do you think the president understands that that it it is not as simple as as what he has described? Do you do you do you understand do do you think the president understands that it probably doesn't matter? whether the good guys develop a super intelligence or the bad guys develop a super intelligence, if you don't have control of that entity, and it has preferences and goals that are inimical to the existence of humanity, it won't matter. It's the entity itself that they're creating. that is gonna prov- that is gonna present the threat to us and and to to your kids, grandkids, all of our all all, you know, humanity in general. Does the president get that, mister secretary?